Economic Research and Perspectives

Economic Research and Perspectives

Drivers of Productivity Growth in Iran’s Mining Sector

Authors
Mohammad Javad Haddadi 1
Mahmood Mahmoodzadeh 2
Masoud Soufimajidpour 3
1 Ph.D. Candidate, Department of Economic, Fi.C., Islamic Azad University, Firoozkooh, Iran.
2 Associate Professor, Department of Economic, Fi.C., Islamic Azad University, Firoozkooh Iran
3 Assistant Professor, Department of Economic, Fi.C., Islamic Azad University, Firoozkooh, Iran
10.48311/ecor.2025.24056
Abstract
This study analyzes the drivers of total factor productivity (TFP) growth across 36 mining activities in Iran from 2012 to 2021 (1391–1400 in the Iranian calendar). TFP growth is decomposed into technical progress, technical efficiency change, and scale efficiency change using a translog production function and a stochastic frontier model. The results show that labor elasticity (0.99) exceeds capital elasticity (0.28), indicating a labor-intensive structure and increasing returns to scale. TFP growth increased from –0.012% in 2013 to 0.493% in 2021, with an average annual growth rate of 0.207%. Technical progress was the primary contributor (0.193%), followed by scale efficiency change (0.011%) and technical efficiency change (0.0ا03%). Iron ore mining recorded the highest TFP growth (0.277%), while precious and semi-precious stone extraction had the lowest (0.138%). Overall, technical progress emerged as the dominant driver of productivity improvements across all sectors.
 
Aim and Introduction:
The mining sector is strategically vital to Iran's economic development due to its abundant mineral resources. However, its contribution to GDP remains limited compared to industry and agriculture. This study examines the determinants of TFP growth in 36 mining activities between 2012 and 2021, decomposing productivity into technical progress, technical efficiency change, and scale efficiency change. The findings aim to support evidence-based policymaking and strategic investment planning in the sector.
 
Methodology:
To estimate TFP growth and its components, a translog production function was specified and estimated using panel data from 36 mining activities. A stochastic frontier model was applied to assess technical and scale efficiency. The analysis covers the period 2012–2021 and utilizes data on labor, capital, and output levels for each activity. Productivity growth was decomposed into:
·         Technical Progress: Technological improvements and advancements in production processes;
·         Technical Efficiency Change: Changes in the effectiveness of converting inputs into outputs using existing technology;
·         Scale Efficiency Change: Gains or losses due to deviations from optimal production scale.
 
Results and Discussion:
The results indicate that Iran’s mining sector is labor-intensive, with labor elasticity (0.99) significantly higher than capital elasticity (0.28). TFP growth showed an upward trend, rising from –0.012% in 2013 to 0.493% in 2021, averaging 0.207% annually. Decomposition analysis reveals that technical progress contributed 0.193% per year, scale efficiency change contributed 0.011%, and technical efficiency change contributed 0.003%. Among the mining activities, iron ore mining achieved the highest TFP growth (0.277%), while precious and semi-precious stone extraction had the lowest (0.138%). Eighteen activities exceeded the average TFP growth rate. The sector’s labor-intensive nature and vulnerability to external shocks, such as international sanctions and commodity price fluctuations, are also discussed.
 
Conclusion:
Technical progress is the main driver of TFP growth in Iran’s mining sector, while technical and scale efficiency changes played minor roles. To enhance productivity, the sector should focus on technological adoption, workforce development, and infrastructure improvements.
 
Recommendations:
1.      Technology Adoption: Promote modern mining technologies and automation to boost operational efficiency.
2.      Workforce Development: Enhance labor skills through training programs to support advanced machinery use.
3.      Policy Support: Implement policies encouraging innovation, private investment, and sustainable practices.
4. Infrastructure Development: Upgrade transport, energy, and communication systems to facilitate efficient mining operations.
Keywords
Mining
Productivity
Scale Efficiency Technical Efficiency
Technical Progress

Subjects

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